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Just two years after the credit crisis struck comes the regulatory aftershock. In the US, Europe and Asia, the shape of new regulations is becoming clear. Governments are subjecting asset managers to far tougher rules and more intrusive supervision. The asset management sector has never had to adapt to so much regulatory legislation in such a short time.
Worst affected is the alternative asset management sector, where many advisors and their funds previously fell outside the regulatory net. Although the new regulations generally do not become effective for many months as yet, managers would be wise to ‘future-proof’ their businesses by planning any necessary changes to their business and operating models.
What has become clear as the details of regulations have emerged is that regulatory arbitrage is not an option. In the early stages of the post-crisis regulatory debate, it appeared possible that as some areas raised their regulatory standards, fleet-footed asset managers would circumvent them by moving to centres with laxer standards.
But regulatory authorities in Europe and the US, at least, are independently introducing, to a certain extent, similar rules. While adapting to the new regulatory environment will be tough for many asset managers – especially some smaller hedge fund managers – we would emphasise the positives. Greater oversight and regulation of alternatives managers may widen their appeal, and place all managers on a level playing field.
